Asian Development Bank - Pakistan

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Brief History Country Program Area of Operations Partners
Distinctive Features Funding Poverty Focus Sources
 
 
Brief History
The Asian Development Bank (ADB) is a multilateral development finance institution
dedicated to reducing poverty in Asia and the Pacific. Established in 1966 it is funded and
owned by 61 member countries. The ADB has been operating in Pakistan since 1966 in a
variety of capacities. In Pakistan ADB provides soft loans to the government as well as
technical assistance grants implemented by a diversity of partners.
The key areas of ADB assistance in Pakistan are defined around the strategic priorities of
sustainable pro-poor growth, inclusive social development, and good governance. ADB has
first supported microfinance development in Pakistan through the microfinance components
of a series of community-based multisectoral area development programs, funded by ADB
loans approved between 1996 and 1999
 
The first ADB stand-alone microfinance initiative was the Microfinance Sector Development
Program (MSDP) launched in 2001 and implemented by the Pakistani Poverty Alleviation
Program (PPAF). The MSDP comprised two loans, a first loan to support the reform program
of the microfinance sector and a second loan to provide services to the poor and
institutional strengthening. The most recent initiative, dated 2003, is ADB lending under the
Rural Finance Sector Development Program, implemented by the Ministry of Finance, which
includes two loans to support the institutional strengthening of the rural development bank,
Zarai Taraqiati Bank Ltd (ZBTL), the State Bank of Pakistan and the project management
unit at the Ministry of Finance.
 
 
Country program
Initiated in 2001, the Microfinance Sector Development Program (MSDP) defines a policy,
legal, and institutional framework in order to facilitate microfinance service delivery. This
project has three main objectives:
1. To support the development of a conducive regulatory framework, which
resulted in the promulgation of the Microfinance Institutions Ordinance 2001
enabling the establishment of sustainable microfinance banks.
2. To facilitate the development of a microfinance bank as a public-private
partnership, the Khushhali Bank. 
3. To initiate the restructuring of Development Finance Institutions, mainly the
Agricultural Development Bank of Pakistan, which is now called the Zarai
Taraqiati Bank Ltd.
In addition a series of funds, managed by the State Bank of Pakistan, were set up to
support the development of microfinance outreach in Pakistan, such as the Microfinance
Social Development Fund, the Community Investment Fund, the Risk Mitigation Fund and
the Deposit Protection fund.
 
The Rural Finance Sector Development Program (RFSDP), started in 2003, has been
designed to assist the Government of Pakistan in accelerating rural economic growth by
addressing key constraints in rural finance. The program aims at ensuring the permanent
access to institutional financial services for a majority of rural households at minimal
transaction costs and encourage private sector participation in the rural finance sector. The
program has four components:
1. create a favourable policy environment to the development of a market-
oriented, mostly private-owned financial sector.
2. To continue institutional restructuring and reforms, especially the key rural
finance institution, ZBTL.
3. To start a new bank fund, managed by the State Bank of Pakistan, which will
be used as capital for lending to rural microfinance institutions.
4. To encourage product and process innovations. A pilot insurance scheme will
be proposed to rural borrowers, to cover crop insurance related to natural
disasters (floods, droughts).
 
Area of Operations
ADB programs have a nation-wide outreach in Pakistan.
 
Partners
As a multilateral development bank, ADB collaborates with the Government of Pakistan and
the State Bank of Pakistan. Through the implementation of its microfinance lending and
technical assistance, ADB has also entered into partnerships with the Khushhali Bank, the
Bank of Khyber, and a number of NGOs involved in microfinance.
 
 
Poverty Focus
As stated by the ADB, the key objective of the MSDP is to reduce poverty, and more
specifically to develop the microfinance sector to efficiently provide financial and social
services to the poor. ADB expects that the microfinance services will have a significant
impact on poverty reduction by increasing incomes of poor households, enhancing outreach
(especially women), building social capital and reducing risks faced by the poor.
 
Distinctive Features
ADB microfinance assistance in Pakistan is ADB first experience with a sector development
approach, using a public-private partnership. The nature, scope and size of the assistance
provided make a substantial impact on microfinance in Pakistan.
 
Funding
Contract awards for ADB projects in Pakistan have averaged $376 million annually over the
past 5 years. Presently, 53 public sector loans covering 38 projects are under
implementation, of which 83% loans are rated satisfactory.
In microfinance the following soft loans have been provided recently to the government of
Pakistan:
 Microfinance Sector Development Program:   US$ 70 million
 Rural Finance Sector Development Program:  US$ 250 million
 
Sources
 Web site: www.adb.org/Pakistan and related ABD projects documents in Pakistan.
 
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